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Industrial output falls while wholesale prices rise slightly

Factory production dips 0.1% in October, down from an average of 0.9% the previous three months. The producer price index rises 0.3% in October. The reports reflect the economy's continued weakness.

November 18, 2009|Neil Irwin

The expansion in the nation's industrial sector slowed as wholesale prices rose slightly in October, according to separate reports Tuesday that underscore the continued weakness of the economy.

Industrial production rose 0.1% in October, the Federal Reserve said, down from much higher rates of expansion that had averaged 0.9% the previous three months. And even that weaker-than-expected number was boosted by chilly fall weather, which led to a strong rise in output by utilities.

Those numbers signal that the burst of activity in the nation's factories that began over the summer has given way to a much more difficult slog out of recession. Manufacturing output actually declined slightly, falling 0.1%, which reflected in part automakers cutting production after the "cash for clunkers" program expired. Output of automobiles fell 1.7%, after rising 8.1% in September.

With inventories lean and demand having stabilized, the nation's factories began expanding production in July after a long decline. But they are still running far below their potential, with capacity utilization at 70.7% in October, up from 70.5% in September and an all-time low of 68.3% in June.

The new data underscore worries that the economic recovery will prove to be tepid, a reflection of the weak labor market and the continued stresses on American consumers that make them reluctant to buy big-ticket goods.

Also underscoring the weakness of the economy, the Labor Department reported that wholesale prices rose a higher-than-expected 0.3% in October, as measured by the producer price index. That was driven by higher energy and food prices, however, which are volatile month to month.

Excluding food and energy, wholesale prices were down 0.6%. That suggests inflation will remain low, as companies will have little ability to raise prices on their products as the goods move through the supply chain.

Irwin writes for the Washington Post.

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